The Sleeping Dragon: Preparing to Battle CECL

CECL will be the biggest regulatory change in the last 30 years.

The current expected credit loss model (CECL) will impact:

Loan commitments | Financial guarantee contracts | Reinsurance receivables | Leases | Trade receivables | Debt instruments.

“Fewer than 25% of financial institutions have begun properly preparing for CECL.”


OFFICIALLY: You Have Until December 2021, but the NCUA states:

“…your credit union needs to take steps in advance to ensure effective implementation of the standard. The board of directors and senior management of your credit union should become familiar with the new accounting standard to assess how the new accounting standard differs from the existing incurred loss model.”

CECL Requires a New Mind-Set for Determining Losses

Today’s Model: Incurred Loss >> Tomorrow’s Model: Forward-Looking Predictive Loss”


The greatest challenge will be to create a statistically valid and reliable model to accurately predict future losses.


Today, FASB identifies two methods for implementing CECL at your institution:


1. Static Pool (Not Credit Union Friendly)

Challenges: Requires extensive amounts of information and is difficult to implement.


2. Credit Migration (Credit Union Friendly)

Benefits: Requires less data, easier to implement and supports credit risk management for credit unions.


“Dr. Randy Thompson, CEO of TCT, predicted the implementation of CECL several years ago and developed one of the few CECL compliant management tools for credit unions.”



TCT offers a CECL Compliant Credit Migration Model that can prepare your credit union today.

Upcoming TCT Risk Solutions Web Seminars:

November 15 • Key Financial Indicators for Boards

December 13 • Crystal Ball for 2018

Upcoming VirtualCorps Web Seminars:

October 10 • Strategies to actively prepare for CECL

December 5 • Putting it All Together: Managing CECL to Benefit Your Credit Union